Air fares set to rocket as oilcos hike ATF prices by 12-14%

Air travellers will have to shell out more for their tickets, as airlines gear up to hike the fuel surcharge once again. The move follows one of the steepest increases in aviation fuel prices that comes into effect tonight. Oil companies have increased the price of aviation turbine fuel by 12-14% in various cities. Though domestic airlines had not yet decided on the quantum of increase, the fuel surcharge is likely to go up from Rs 1,650 per ticket now to about Rs 2,000, senior airline sources said. In a new development, some airlines like SpiceJet have decided not to pass on the increase uniformly to all passengers. The increase in surcharge for passengers travelling short distances, mostly on ATRs and other smaller aircraft will be between Rs 100 and Rs 150 while the medium and long-haul passengers will pay out Rs 350 to Rs 400 more. Passenger lobby groups have been asking for differential fuel surcharges depending on the distance travelled, for some time now. Airlines have been forced to accede to this, because higher fares have started killing passenger demand, particularly on shorter sectors where train fares are comparable. Growth in passenger demand has come down substantially in the first three months of this year.
Speaking to ET, the SpiceJet CEO Siddhanta Sharma said high air fares could stunt passenger growth, specially among the price-sensitive leisure segment. Fuel surcharge combined with congestion charge now amounts to Rs 1,800 per ticket. The impact is felt most by short haul passengers who could end up paying a surcharge higher than the basic fare. Domestic airlines last increased fuel surcharge in December, after which oil prices had started softening. Though oil companies reduced ATF prices in January and February there was no relief for passengers as airlines did not cut the surcharge. However, oil prices have increased significantly in the past one month, with the Indian crude oil basket breaching the $100/bbl mark. The increase in prices is maximum at India’s busiest airport in Mumbai, where airlines also face high sales tax. The new price for ATF at Mumbai is Rs 55,192 per KL. The minister for civil aviation Praful Patel says has been asking state governments to cut sales tax on aviation fuel. Airlines too have been lobbying for a cut in taxes, as aviation fuel in India now costs about 70% more than in Singapore or Dubai. From the point of view of the oil companies, ATF is one of the few products that they make profits on, since prices are passed on every month to the airlines. They lose money on the bulk of other petroleum products like petrol, diesel, kerosene and LPG.